UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)                    October 30, 2007

ENZON PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware		0-12957		22-2372868
(State or other jurisdiction of incorporation)		(Commission File No.)		(IRS Identification No.)

685 Route 202/206, Bridgewater, New Jersey		08807
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code                    (908) 541-8600

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)
o		Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02		Results of Operations and Financial Condition.

On October 30, 2007, Enzon Pharmaceuticals, Inc. (“Enzon”) issued a press release reporting certain financial and other information for the quarter ended September 30, 2007. A copy of Enzon’s press release dated October 30, 2007, is attached as Exhibit 99.1 to this Current Report and is incorporated by reference into this Item 2.02.

In addition, Enzon will broadcast live by webcast its Investor Day meeting from approximately 8:30 a.m. to 1:00 p.m. Eastern Time on Tuesday, October 30, 2007. During the meeting, members of Enzon’s executive management team and heads of various research and development programs will provide updates on the status of several programs currently underway, as well as earnings for the quarter ended September 30, 2007. The meeting will be webcast via the internet at http://www.vcall.com/IC/CEPage.asp?ID=122287 and an archived replay will be available after the event until Friday, November 30, 2007 at approximately 12:01 am Eastern Time. Listeners should log on to the website at least fifteen minutes before this event to download and install any necessary audio software.

The information in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liability of that Section, nor shall such information be deemed to be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in that filing.

Item 9.01		Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.		Description
99.1		Press Release of Enzon Pharmaceuticals, Inc. dated October 30, 2007

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October 30, 2007

Exhibit 99.1

		For Immediate Release

		Contact:		Craig Tooman
				EVP, Finance and Chief Financial Officer
				908-541-8777

ENZON REPORTS THIRD QUARTER 2007 RESULTS

Partial royalty sale provides positive earnings and cash to eliminate outstanding 2008 debt

BRIDGEWATER, NJ – October 30, 2007 – Enzon Pharmaceuticals, Inc. (Nasdaq: ENZN) today announced its financial results for the third quarter of 2007. For the three months ended September 30, 2007, Enzon reported net income of $87.5 million or $1.23 per diluted share, as compared to net income of $2.2 million or $0.05 per diluted share for the same quarter in 2006. Third quarter results in 2007 were favorably impacted by the August 2007 sale of a 25% interest in future royalties from PEG-INTRON^®, marketed by Schering-Plough Corporation, for $92.5 million ($88.7 million net of related costs) to DRI Capital (DRI).

“The sale of a portion of our PEG-INTRON royalty this quarter was a very strategic financing move to effectively eliminate the outstanding 2008 debt burden, while still preserving the majority of the royalty stream,” said Jeffrey H. Buchalter, chairman and chief executive officer of Enzon. “We are also focused on the advancement of our innovative pipeline, such as the HIF-1a antagonist and PEG-SN38 programs, which demonstrates our strong commitment to developing a differentiated oncology portfolio for the benefit of patients.”

Financial Results

For the three months ended September 30, 2007 and 2006, Enzon reported an adjusted net loss of $1.3 million or $0.03 per diluted share.

Revenues

The following table reflects the revenues generated by product and segment for each of the three-month periods ended September 30, 2007 and 2006.

		Three Months Ended
		(in thousands)
		September 30,				September 30,
		2007				2006				% Change
Products
Oncaspar		$	10,520			$	7,418				42	%
DepoCyt			2,163				2,000				8	%
Abelcet			6,743				8,986				-25	%
Adagen			5,448				6,891				-21	%
Total Products		$	24,874			$	25,295				-2	%
Royalties		$	18,206			$	18,705				-3	%
Contract Manufacturing		$	3,761			$	1,856				103	%
Total Revenues		$	46,841			$	45,856				2	%

Products Segment

Sales from the products segment, comprised of Oncaspar^®, DepoCyt^®, Abelcet^®, and Adagen^®, decreased slightly to $24.9 million for the three months ended September 30, 2007, from $25.3 million for the three months ended September 30, 2006. The Company continues to experience revenue growth in its oncology products, Oncaspar and DepoCyt, offsetting the decline in Abelcet and Adagen sales.

Sales of Oncaspar grew to $10.5 million or 42 percent for the three months ended September 30, 2007, as compared to $7.4 million for the three months ended September 30, 2006. The growth is attributable to the adoption of Oncaspar in certain new cooperative group protocols in pediatrics and adult patients that call for dosage regimens that will include a greater number of weeks of Oncaspar therapy, as well as a price increase. The Company is studying Oncaspar in a Phase I trial in combination with gemcitabine for patients with solid tumors and lymphoma.

Sales of DepoCyt, increased to $2.2 million or 8 percent for the three months ended September 30, 2007, as compared to $2.0 million for the three months ended September 30, 2006. In April 2007, the FDA granted full approval of DepoCyt. Originally DepoCyt was approved under the FDA’s Sub Part H regulation. Given the small number of patients treated with DepoCyt, quarterly sales variability will likely continue.

Sales of Abelcet in the U.S. and Canada for the three months ended September 30, 2007 were $6.7 million, down 25 percent as compared to $9.0 million for the three months ended September 30, 2006. This volume decrease was due to the continued competitive conditions in the antifungal market.

Sales of Adagen decreased 21 percent to $5.4 million for the three months ended September 30, 2007, as compared to $6.9 million for the three months ended September 30, 2006. This market has a very small number of patients so quarter-to-quarter variability is not uncommon.

Royalties Segment

Revenues from the Company’s Royalties segment for the three months ended September 30, 2007 were $18.2 million, as compared to $18.7 million for the three months ended September 30, 2006, a decrease of 3 percent. The decrease in royalties was primarily due to the decrease in royalties from Macugen. Macugen has experienced increased competition since the launch of a new agent in 2006. The decrease in Macugen royalties was partially offset by growth in PEG-INTRON. As previously stated, the Company sold a 25% interest in its future royalties on PEG-INTRON for $92.5 million, which resulted in an $88.7 million gain in the royalty segment. Starting in the fourth quarter of 2007 and beyond, the royalty segment will be impacted by the 25% reduction in PEG-INTRON royalties recorded.

Contract Manufacturing Segment

The Company’s revenues from its Contract Manufacturing segment were $3.8 million for the three months ended September 30, 2007, as compared to $1.9 million in the corresponding period of the prior year. The contract manufacturing segment includes contract manufacturing revenues related to services the Company provides for a number of customers who require injectable products, such as Abelcet for markets outside of Canada and the U.S. The increase in contract manufacturing revenue this quarter is due to a revenue reconciliation for two contract manufacturing products in the third quarter of 2006 which resulted in a reduction of revenue of $1.2 million. The timing of shipment to third parties also resulted in higher revenues for the quarter.

Cost of Product Sales and Contract Manufacturing

The Company’s cost of goods sold was $14.1 million for the three months ended September 30, 2007, compared to $12.1 million for the three months ended September 30, 2006. This increase is due in part to additional amortization expense for the license of the raw material used in the production of Oncaspar and additional royalties for the growth in Oncaspar sales.

Research and Development

The Company’s research and development expenses were $10.8 million for the three months ended September 30, 2007, as compared to $10.6 million for the three months ended September 30, 2006. The expenses are associated with the clinical trials and process development activities currently underway for four of the Company’s product candidates in development – the HIF-1 alpha antagonist, PEG-SN38, rhMBL and additional uses for Oncaspar. Enzon continues to advance its novel and differentiated oncology pipeline.

Selling, General and Administrative

Selling, general and administrative expenses were $14.3 million for the third quarter of 2007, essentially unchanged from the same period last year. The Company continues to make select investments in selling, marketing, and other initiatives to further its objective of delivering long-term value.

Acquired In-Process Research and Development

In August 2006, the Company paid $8.0 million for worldwide rights to develop and commercialize certain RNA antagonists.

Restructuring Charge

The Company announced in February 2007 plans to consolidate its manufacturing sites. As a result of this decision, the Company recorded a $5.5 million charge this quarter, of which $5.1 million relates to the write-off of assets associated with a portion of our South Plainfield facility that are being decommissioned. The remaining balance is associated with the accrual of severance costs. On a year-to-date basis, we have recognized $6.8 million, of which $1.7 million relates to severance costs that will be paid at the completion of the consolidation and $5.1 million related to the write-off of assets. The Company has also incurred $1.9 million in expenses earlier this year related to validation batches, which were recorded in cost of product sales and contract manufacturing, bringing the total cost in 2007 associated with the consolidation to $8.7 million. As previously reported, the Company expects to incur $8.0 million to $10.0 million in 2007 in the process of consolidating our manufacturing at our Indianapolis facility.

Gain on Sale of Royalty Interest

During the three months ended September 30, 2007, we sold a 25% interest in our future royalty revenues on sales of PEG-INTRON. The gross selling price was $92.5 million. The gain on the sale of $88.7 million, after deducting related costs of the transaction, was recognized in full in our Royalties segment in the third quarter of 2007.

Income Tax Provision

A federal income tax provision of $2.0 million was recorded for the three months ended September 30, 2007, which represents federal alternative minimum tax, primarily related to the gain on the sale of the royalty interest.

Other Income (Expense)

Net other income (expense) is comprised of investment income, interest expense, and other non-operating expenses. The Company reported other expense of approximately $1.1 million for the three months ended September 30, 2007, as compared to other income of nearly $1.8 million in the same period in the prior year. In 2006, the Company reported a net gain of $3.6 million as a result of the repurchase of 2008 debt at a discount to par.

Cash and Investments

Total cash reserves, which include cash, cash equivalents, short-term investments, marketable securities, and restricted investments and cash, were $261.3 million as of September 30, 2007, as compared to $240.6 million as of December 31, 2006. During this quarter, the Company purchased $24.8 million of its existing 2008 convertible notes. This quarter we received $92.5 million as a result of the sale of 25% of our royalty interest in PEG-INTRON. $82.0 million of the proceeds is held in a restricted cash account for the sole purpose of extinguishing the remaining outstanding 2008 debt.

Reconciliation of GAAP net income (loss) to adjusted net income (loss)

The following table reconciles the Company’s net income and net income per diluted share as determined in accordance with U.S. generally accepted accounting principles (GAAP) to its adjusted net loss and net loss per diluted share for the three months ended September 30, 2007 and 2006 respectively:

						Three Months Ended
		(in thousands, except per-share amounts)
		September 30, 2007								September 30, 2006
						Net
						income								Net ncome
		Net				(loss) per				Net				(loss) per
		income				diluted				income				diluted
		(loss)				share				(loss)				share
GAAP net income		$	87,530			$	1.23			$	2,238			$	0.05
Net adjustments to GAAP:
- Net realized gain related to the repurchase of debt (1)			(182	)			—				(3,569	)			(0.08	)
- Gain on sale of royalty interest (2)			(88,666	)			(1.26	)							—
Adjusted net loss(3)		$	(1,318	)		$	(0.03	)		$	(1,331	)		$	(0.03	)

About Enzon

Enzon Pharmaceuticals, Inc. is a biopharmaceutical company dedicated to the development, manufacturing, commercialization of important medicines for patients with cancer and other life-threatening conditions. Enzon has a portfolio of four marketed products, Oncaspar^®, DepoCyt^®, Abelcet^® and Adagen^®. The Company’s drug development programs utilize several cutting-edge approaches, including its industry-leading PEGylation technology platform used to create product candidates with benefits such as reduced dosing frequency and less toxicity. Enzon’s PEGylation technology was used to develop two of its products, Oncaspar and Adagen, and has created a royalty revenue stream from licensing partnerships for other products developed using the technology. Enzon also engages in contract manufacturing for several pharmaceutical companies to broaden the Company’s revenue

base. Further information about Enzon and this press release can be found on the Company’s web site at www.enzon.com.

Forward Looking Statements

There are forward-looking statements contained herein, which can be identified by the use of forward-looking terminology such as the words “believes,” “expects,” “may,” “will,” “should”, “potential,” “anticipates,” “plans” or “intends” and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be materially different from the future results, events or developments indicated in such forward-looking statements. Such factors include, but are not limited to the timing, success and cost of clinical studies; the ability to obtain regulatory approval of products, market acceptance of, and continuing demand for, Enzon’s products and the impact of competitive products and pricing. A more detailed discussion of these and other factors that could affect results is contained in our filings with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2006 and our quarterly reports on Form 10-Q. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. No assurance can be given that the future results covered by the forward-looking statements will be achieved. All information in this press release is as of the date of this press release and Enzon does not intend to update this information.

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

		Three months ended
		September 30,
		2007				2006
Revenues:
Product sales, net		$	24,874			$	25,295
Royalties			18,206				18,705
Contract manufacturing			3,761				1,856
Total revenues			46,841				45,856
Costs and expenses:
Cost of product sales and contract manufacturing			14,118				12,141
Research and development			10,814				10,599
Selling, general and administrative			14,274				14,299
Amortization of acquired intangible assets			171				184
Acquired in-process research and development			—				8,000
Restructuring charge			5,513				—
Total costs and expenses			44,890				45,223
Gain on sale of royalty interest, net			88,666				—
Operating income			90,617				633
Other income (expense):
Investment income, net			2,689				2,831
Interest expense			(4,286	)			(5,912	)
Other, net			497				4,813
			(1,100	)			1,732
Income before income tax provision			89,517				2,365
Income tax provision			1,987				127
Net income		$	87,530			$	2,238
Earnings per common share — basic		$	1.99			$	0.05
Earnings per common share — diluted		$	1.23			$	0.05
Weighted average shares — basic			43,925				43,590
Weighted average shares — diluted			74,344				43,590

ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

		September 30,				December 31,
		2007				2006
ASSETS
Current assets:
Cash and short-term investments		$	162,889			$	173,544
Restricted investments and cash			82,156				—
Accounts receivable, net			13,788				15,259
Inventories			20,627				17,618
Other current assets			6,918				5,890
Total current assets			286,378				212,311
Property and equipment, net			44,790				39,491
Other assets:
Marketable securities			16,277				67,061
Amortizable intangible assets, net			70,723				78,510
Other assets			5,350				6,457
Total assets		$	423,518			$	403,830
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses		$	29,786			$	59,885
Notes payable			81,921				—
Total current liabilities			111,707				59,885
Notes payable			275,000				397,642
Other liabilities			3,165				2,744
Total liabilities			389,872				460,271
Stockholders’ equity (deficit)			33,646				(56,441	)
Total liabilities and stockholders’ equity (deficit)		$	423,518			$	403,830
Common shares outstanding			44,106				43,999